Articles of Association commonly known as AOA is the legal document of the company. Just like the Memorandum of Association, AOA works as a company’s constitution.
Let’s understand the term in more detail:
- Articles of Association includes the rules and protocols that manage the internal affairs of the company.
- The Articles of Association governs the relationship between the company and its members and between all the members.
- The obligations and rights of the directors and the shareholders are stated in the Articles of Association.
- A copy of the document has to be wedged with the registrar of companies.
- This is a public document, and anyone can examine it by paying an amount of fee either in the company or the registrar’s office.
- Information related to voting rights of the shareholders, company meetings, the board of directors, etc. is specified in the AOA.
- The methods that are to be used in achieving the day to day goals of the companies are outlined in the document, and it is used as a user guide.
Particulars included in the Articles of Association
- Number of shares and their value
- Preliminary contracts and how they are to be adopted
- Allocation of shares
- Issuing preference shares
- Calls on all the shares
- Right on shares
- Transfer of shares
- Relocation of shares
- Share forfeiture
- Capital alteration
- Buyback of shares
- Certification of shares
- Provisions related to converting the shares into stock
- Rules related to company meetings
- Minutes of the meetings
- Appointment of directors
- Duties and powers of directors
- Structure of audit committee
- Issuing debentures
- Details of company’s secretary, managing director and whole- time director
- Directors’ qualifications and salaries
- Election of chairman of the company and his voting rights
- Policies related to dividend
- Borrowing powers of the members of the company
- Accounts and auditing
- Winding up of the company
- Indemnity and security
- Capitalization of reserves
For the following companies, it is obligatory to have Articles of Association
- 1. Unlimited companies
In the case of unlimited companies, the information related to the number of registered members and the amount of share capital has to be disclosed in the Articles.
- Companies Limited by Guarantee
The number of members with the help of which the company is registered is stated in the Articles.
- 3. Private Companies Limited by Shares
In the case of private companies having a share capital, there is a restriction on transferring the shares, and the number of members is limited to 50 only. The company cannot invite the public for subscription of shares. All these provisions are stated in the Articles.
The scope of Articles of Association
In addition to the existing members, the new members who will be joining the company in the future will be bound by the Articles. Other members whom the Articles bind are inheritors, legal representatives and hires of members. The members get linked with the company from the day when they sign the document. The members of the company are expected to perform the duties and have some rights. In the same way, the company also have some responsibilities towards the members.